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2015 (12) TMI 690 - ITAT HYDERABAD

2015 (12) TMI 690 - ITAT HYDERABAD - [2015] 44 ITR (Trib) 562 (ITAT [Hyd]) - Disallowance of investment allowance and the depreciation on Plant & Machinery relating to cement unit - Held that:- CIT(A) did not disturb the interest allowed on capital borrowed for the purpose of cement unit by holding that the cement business forms part of the fertilizer business. However, she disallowed the claim of depreciation and investment allowance. As regards the interest and other expenditure is concerned, .....

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t on record that the machinery was not installed by the end of the relevant previous year i.e., 31-12-1983 in the case of assessee which fact has been considered and accepted by the Hon'ble High Court of AP. When the machinery has not been installed and used by the assessee for the purpose of manufacturing of cement, then the claim of depreciation and investment allowance is rightly not allowed by the AO. In view of the same, we do not see any reason to interfere with the order of the CIT(A) - D .....

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Income Tax Act [Act]. In this appeal, assessee is aggrieved by the order of the CIT(A) in upholding the disallowance of investment allowance and the depreciation on Plant & Machinery relating to cement unit for the year under consideration. It is the case of the assessee that the CIT(A) has failed to appreciate the findings given by the Tribunal in in the assessee's own case (dt. 27-07-1995) that fertilizer business and cement business constitute same business and the said order of the T .....

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activity of manufacture of cement. Upto AY. 1983-84, assessee was adopting the previous year as year ending on 31st of December. On 05-03-1984, the assessee filed a letter before the Income Tax Officer, requesting for according change in the end of the previous year to March, 31st 1984 instead of December, 31st 1983. The said application of the assessee was rejected. This issue went up to the Hon'ble High Court and the High Court dismissed the assessee's appeal. Thereafter, the assessee .....

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the accounts for the period 01-01-1983 to 31-12-1983 were also filed. On perusal of the same, the AO observed that the assessee has claimed a sum of ₹ 7,05,03,027/- towards interest and commitment charges and other expenses in connection with the capital borrowed. He observed that the amount represents expenditure incurred in connection with the financing arrangements made for cement project during the year 1983 and that this amount was shown under the head 'Incidental expenditure' .....

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t unit did not commence production by 31-12-1983. To come to this conclusion, he observed that the Income Tax Officer of the relevant ward had visited the cement factory on 21-04-1984 and found that the production of cement commenced only during March, 1984 and the final production was started on 02-04-1984. 3. It was further observed that by 31-12-1983, assessee did not install the Plant & Machinery totally and most of the Plant & Machinery of cement unit was installed from January, 198 .....

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there is no inter dependence between the fertilizer unit and cement unit and each one is an independent unit for business and the accounts are also maintained separately. Thus observing, the AO disallowed the claim of the expenditure, as well as the depreciation and investment allowance on the Plant & Machinery relating to the cement unit. Aggrieved by the order of AO, assessee preferred an appeal before the CIT(A), who allowed the same by following the order of the predecessor in the assess .....

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igh Court vide orders dt. 05-12-2011 held that the manufacturing of cement has not started and therefore, the assessee is not entitled to the depreciation and investment allowance. Thus, the issue was decided in favour of the Revenue. Against the order of the Hon'ble High Court, the assessee preferred an appeal before the Hon'ble Supreme Court of India which was also rejected. Thus, the issue as to whether assessee has set up and commenced the cement manufacturing business has reached fi .....

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sions made by the assessee before the authorities below submitted that the finding of the Tribunal in the appeal proceedings, that the cement unit is a part of business of fertilizer unit has attained finality as the Revenue did not carry the matter in appeal before the Hon'ble High Court and therefore, the claim of depreciation as well as investment allowance pertaining to the cement unit being business expenditure also has to be allowed as 'business expenditure' of the assessee. He .....

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